TRAVERSE CITY — City commissioners heard sharply divided public opinion Monday night on four scenarios for the future of Tax Increment Financing District 97, which is set to expire in 2027 and has captured $4.5 million annually for downtown improvements.
Tax Increment Financing works by creating a financial snapshot of a district at a specific point in time. Property taxes based on that original value continue flowing to the city, county, and schools as normal. But when property values increase over the years, the extra tax revenue generated by that growth is captured and reinvested only within that district for improvements and infrastructure. The tax rate stays the same — TIF just redirects where the growth money goes.
TIF 97 encompasses 2.6% of the city’s geographic area but represents 13% of its taxable value at $213 million.
City Manager Benjamin Marentette presented options ranging from allowing the district to expire to extending it for 30 more years with projected captures between zero and $213 million. The presentation sparked debate over whether the downtown tax mechanism subsidizes tourism at the expense of city neighborhoods or provides crucial infrastructure funding that benefits all residents.
Under a 2024 charter amendment, any decision must be approved by voters and will most likely be added to the ballot in November.
The first scenario would let TIF 97 expire, returning $1.32 million annually to the city’s general fund while eliminating $1.9 million in contributions from non-city taxing entities, including the county and schools. The city would assume sole responsibility for all downtown infrastructure and maintenance.
The second option would reset the district in 2028, starting with an estimated $117,000 in year one and projecting $64.5 million in total capture over 30 years — $36.5 million for the city and $28 million from non-city sources. However, Marentette noted that taxing jurisdictions could opt out under this scenario.
The third scenario would extend TIF 97 as currently structured for up to 30 years, projecting $213 million in total capture — $121 million for the city and $92 million from non-city sources.
The fourth option would extend the district with reduced capture percentages. Using a 50-50 split as an example, this would return $50 million to the city general fund and $46 million to non-city taxing jurisdictions while capturing $106 million over 30 years.
City resident Fred Denver challenged the city’s claim that TIF does not raise property taxes.
“The tax revenue that’s diverted by TIF 97 puts a hole in the city budget that all city taxpayers have to make up through higher property tax rates,” Denver said. “The TIF 97 district does not pay its fair share towards common city basic expenses like police, fire, ambulance, parks, and streets.”
Denver said the downtown increasingly serves tourists and nonresidents with seasonal condos and short-term rentals, and called for letting TIF 97 expire on schedule.
Another resident questioned whether the Downtown Development Authority could develop a comprehensive plan by November, noting that upcoming voters may not be in a favorable mood.
Since its creation in 1997, TIF 97 has funded approximately $21 million in downtown improvements, including streetscape enhancements, riverwalks, the Pine Street pedestrian bridge, the Larry C. Hardy parking structure, and Clinch Park improvements.
Current maintenance includes a $630,000 annual service agreement that increases 1.5% yearly to offset city services, including Treasury, Engineering, Human Resources, and a downtown police officer, plus $80,000 for trash and recycling.
The city’s capital improvement plan identifies $29.5 million in potential TIF-eligible projects, including $11.6 million for the Lower Boardman/Ottaway Riverwalk Phase 1, $7.6 million for East Front streetscape improvements, and $3.7 million for Parking Lot B reconstruction.
Commissioners were asked to provide direction on preferred scenarios for further analysis and guidance on alignment with city objectives and strategic action plan priorities.
City Treasurer and Finance Director Heidi Scheppe, who supported Marentette’s presentation, noted that direction is needed for forecasted budgeting, fund balance strategy, and long-term planning.
An ad hoc group working with the DDA will develop initial proposals, followed by a joint session with the City Commission for feedback before any plan goes to voters. Under the charter amendment, voters must approve any TIF plan before the City Commission can act on it.
If TIF funding is not extended, the presentation noted that additional millages could be needed to fund downtown projects, raising taxes for all city taxpayers.